Morning traders. Thanks Trees and after-market regulars.
Market wrap:
Australian stocks are aiming higher after Wall Street rallied strongly overnight as China's market rout decelerated and bargain-hunters snapped up beaten-up energy and resource companies.
The September SPI200 futures contract rallied 23 points or more than 0.4% to 5565 following solid gains in BHP, Rio Tinto, iron ore, oil and base metals.
The S&P 500 broke a five-session losing run - the longest since January - with a bounce of 26 points or 1.24%. The Dow gained 190 points or 1.09%, with energy giants Exxon Mobil and Chevron leading the recovery. The Nasdaq added 49 points or 0.98%.
“China slowed the big sell-off it saw [on Monday], and that’s lifting the US market,” Terry Morris, senior equity manager at National Penn Investors Trust in the US, told Bloomberg. “Reported earnings have been okay so far, and we’ll get a lot more reports to digest as the week goes along.”
The Shanghai Composite yesterday trimmed an initial fall of 5.1% to a final loss of 1.68%, raising hopes that the market is stabilising after suffering its biggest loss in seven years on Monday, a collapse of 8.48%. The rout was sparked by weak economic data and fear that recent government intervention will be insufficient to stop the deflation of a bubble in the stock market.
Last night's US recovery came as the Federal Reserve began a two-day policy meeting, steering the spotlight from some weak economic numbers. Consumer confidence slumped to a 10-month low this month as the stock market staggered under the twin threats of a Greek default and a Chinese market collapse. The Conference Board's index dropped to 90.9 from 99.8 last month. Expectations for the future declined from 92.8 to 79.9, the lowest level in almost a year and a half.
A separate report showed house prices rose less than expected during May. The Case-Shiller home price index rose 4.9%, versus expectations for a gain of 5.6%.
More than a fifth of S&P 500 companies are due to report quarterly earnings this week. Despite several high-profile companies missing analyst targets, more than three-quarters of companies that have reported to date have exceeded profit estimates. Shares in Twitter were lately up 4.84% in after-market trade after a strong profit profit this morning eased concerns about the company's advertising strategy.
The energy exchange traded fund surged 2.86% from its lowest level since 2012 after crude oil snapped a four-session losing run. West Texas Intermediate crude for September delivery settled 59 cents ahead at US$47.98.
“We have been down the last few days so a little short-covering rally is not surprising,” Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch. “Bear market rallies can be fast and violent.”
BHP rallied 3.03% and Rio Tinto 2.25% in US trade from six-year lows. Spot iron ore for import to China yesterday improved 80 cents to US$52.20 a dry ton.
Base metals recouped some of their recent losses as Chinese government intervention in the stock market raised hopes of further measures to stoke the economy. In London, copper bounced 2.2%, aluminium 1%, lead 1.6%, nickel 3%, tin 3.2% and zinc 2.4%. US copper for September delivery was recently up 2.5% at US$2.41 a pound.
US gold miners steadied with the precious metal as traders waited to see whether the Fed meeting will offer any clues to the timing of the first rate increase. The NYSE Arca Gold Bugs index edged up 0.65% as gold for August delivery eased 20 cents to US$1,096.20 an ounce.
European stocks regained some of Monday's heavy losses. The Stoxx Europe 600 rallied 1.07%, Germany's DAX 1.06%, France's CAC 1.01% and Britain's FTSE 0.77%.
The dollar was this morning buying 73.29 US cents.
TRADING THEMES TODAY
REBOUND: The XJO has been leaning towards a rally for the last two sessions and finally has the lead it needs to go on with it. Importantly, the overnight strength in the US market was in areas where Australia is strong: materials, energy and industrials. Bargain hunters decided it was time to pick up the most beaten-up corners of the market, providing a lift for oilers, BHP and Rio. Gold miners will have to wait for the outcome of the two-day Fed meeting that began overnight. Recent history shows Wall Street tends to sell off in the lead-up to Fed meetings, then rally once the event gets underway, so the pattern of the past week was fairly predictable. Wish I'd remembered that last week, rather than this morning...
ECONOMIC NEWS: No significant domestic news scheduled today. Tonight's big news in the US is the Federal Reserve's funds rate policy statement. Also due: pending home sales and crude oil inventories.
